A strategic buyer has approached us and is valuing our company based on our historical standalone earnings, but we know they will immediately cut our redundant back-office costs. How do we calculate and capture this synergy value in our final deal structure?

Question

Tyler Smith · Accepted Answer

Strategic buyers acquire companies to achieve synergies, but their initial offers will always value your business on a standalone basis. If you let them, they will keep one hundred percent of the synergy savings for themselves while paying you a standard market multiple.

To capture your share of this upside, you must model the cost and revenue synergies yourself. Identify redundant administrative staff, overlapping software licenses, and real estate consolidation opportunities that the buyer will execute post-closing.

Once you have calculated these savings, present them as pro-forma adjustments to your EBITDA. While a buyer will rarely pay you for all expected synergies, you can negotiate to split the value.

We recommend using this synergy math to justify a premium multiple on your standalone earnings. If you show that your company is worth significantly more to them than to a financial buyer, you have the leverage to demand a higher purchase price or a structured earnout that triggers as those synergy milestones are met.